Does Having a Car Loan Damage Your Credit Score?

At Zoom Car Loans, we often speak with clients who are worried that having a car loan will damage their credit score.

It’s a common concern—especially for people who have had credit problems in the past.

The truth is, having a car loan doesn’t automatically hurt your credit. In fact, when managed properly, it can actually improve your credit over time.

Let’s break it down.

Car Loans and Your Credit Score

Your credit score is based on several factors, including your repayment history, credit limits, how much of your available credit you’re using, the length of your credit history, and how often you apply for credit.

When you take out a car loan, it gets recorded on your credit report as a form of “credit liability.” Whether it helps or harms your score depends on how you manage that debt.

When a Car Loan Can Help

If you make your repayments on time, a car loan can have a positive impact on your credit score. This is because repayment history is the single biggest factor in determining your credit score.

Lenders want to see that you can handle regular repayments over time—and a car loan gives you the perfect opportunity to prove that.

A car loan also adds diversity to your credit profile, which can help improve your score. This is known as “credit mix” and shows lenders that you can manage different types of credit responsibly.

For someone with a poor credit history, a well-managed car loan can be a step towards rebuilding financial credibility.

Many of our clients at Zoom Car Loans have used car loans as a way to improve their credit standing after experiencing setbacks such as defaults, bankruptcies, or late payments.

When a Car Loan Can Hurt

On the flip side, if you miss repayments or default on the loan, your credit score will take a hit.

Missed payments are reported to credit bureaus and stay on your record for several years, which can make future borrowing more difficult.

Also, applying for too many loans in a short period can lower your credit score due to multiple “hard inquiries” on your report.

That’s why it’s important to work with a broker like Zoom Car Loans—we help match you with a suitable lender the first time, reducing the need for multiple applications.

How Zoom Car Loans Can Help

At Zoom Car Loans, we specialise in helping Aussies with bad credit get approved for car finance. But we go beyond just finding you a loan—we also want to set you up for future financial success.

We work with a large panel of lenders who understand that life doesn’t always go to plan.

Whether you’ve had a default, been discharged from bankruptcy, or are currently receiving Centrelink payments, we’ll do our best to help you secure a loan you can afford—and manage successfully.